The privatisation of the state government's 300,000-member superannuation fund GESB remains stalled, with an expanding number of problems - including tax treatments - preventing the state from giving the move the green light.
The privatisation of the state government's 300,000-member superannuation fund GESB remains stalled, with an expanding number of problems - including tax treatments - preventing the state from giving the move the green light.
State Treasurer Troy Buswell said today he had sought legal advice on whether the biggest of GESB's funds might have a tax problem if it was handed over to its members, while also confirming that the contentious treatment of reserves remained an issue.
Mr Buswell remains a supporter of the mutualisation which was to have occurred on July 1 2008 before his predecessor, Eric Ripper, stopped the process with one day to spare.
At the time, Mr Ripper's office confirmed that the treatment of reserve funds, thought to amount to hundreds of millions of dollars, was a key issue that had forced his hand.
It is understood that Mr Ripper called a halt to proceedings on advice from under-treasurer Tim Marney.
WA Business news has previously written that it believed Mr Marney had received advice from his department's own actuarial adviser, PricewaterhouseCoopers partner Catherine Nance, that surplus funds of almost $360 million were to have been transferred across to the mutualised structure, about 12 times the amount she recommended.
Critics believe the reserves are linked to Gold State Super, a defined benefit scheme which was not to be mutualised and would remain the responsibility of the state.
In a statement today, the Treasurer said significant progress had been made to date on the mutualisation of GESB. However two major issues, outside the State's control, needed to be resolved before a firm date for mutualisation could be set.
Mr Buswell said the state is currently requesting the Commonwealth to confirm that the proposed mutualisation arrangements are consistent with West State Super's current untaxed status. Legal advice on the issue was being sought from the State Solicitor General.
"West State Super has a unique status amongst superannuation funds - while it is an accumulation fund, it is not subject to taxation," the Treasurer said.
"If mutualisation was to jeopardise this untaxed status, the Government's position would need to be reviewed."
Below is a list of stories written by WA Business on the issue in the past year, followed by Mr Buswell's statement:
Actuary raised GESB surplus concerns
Thursday, 31-July-2008
The concerns of one of Australia's leading actuaries regarding the transfer from the state of about $330 million in assets may have stopped the mutualisation of $9 billion fund manager GESB, which claims about one quarter of Western Australia's workforce as members.
Masters of spin and deflection
Thursday, 10-July-2008
Are we living in a state of secrecy? I've always taken the optimistic view that governments in Western Australia generally want to be open and transparent.
GESB surpluses mount
Thursday, 10-July-2008
As much as $440 million in surpluses generated by member contributions to the Gold State Super pension fund could have been moved out of government reach under a $9 billion mutualisation plan halted by treasurer Eric Ripper last week.
Treasurer mute on GESB concerns
Thursday, 3-July-2008
Two days after stopping the pseudo privatisation of the state's $9 billion superannuation fund, treasurer Eric Ripper and his government have yet to reveal significant detail on why they acted at the last minute.
Treasurer halts GESB mutualisation
Tuesday, 1-July-2008
Plans to turn over ownership of the state's $9 billion superannuation manager GESB to 295,000 members have been thrown into disarray, with the body and the government apparently unable to conclude a deal at the 11th hour.
Wayne Osborn to chair GESB Mutual
Tuesday, 22-April-2008
Treasurer Eric Ripper today announced that former Alcoa Australia managing director Wayne Osborn would be the inaugural chair of GESB Mutual Ltd, which will be the largest financial services company based in Western Australia when launched on 1 July.
Financial management 101
Thursday, 20-March-2008
The impending mutualisation of GESB, the Government Employees Superannuation Board, has allowed me to dig into a few areas that I haven't touched before.
GESB steps into a brave new world
Thursday, 20-March-2008
The imminent restructuring of Western Australia's government superannuation administrator has barely rated a ripple in the financial circles as the state prepares to let loose a giant new local player, but not everyone is pleased.
Today's announcement is below:
Treasurer Troy Buswell today confirmed the Government's support for reform of public sector superannuation arrangements in Western Australia, including mutualisation of the public service fund GESB and the introduction of choice for government employees.
However a number of outstanding issues, including the tax implications of mutualisation, mean that no firm completion date can yet be set.
"In Opposition I was a strong supporter of the mutualisation," Mr Buswell said.
"And I continue to be committed to giving State Government employees the same opportunity as other Australian workers to choose their superannuation fund".
The reforms were set out in legislation passed in late 2007. The previous Treasurer Eric Ripper supported the GESB mutualisation but delayed its implementation last year pending further preparatory work.
Mr Buswell said the Government had the interests of the State, its taxpayers and GESB members to consider and was not willing to rush the process, particularly given the current state of financial markets.
Once mutualised, a reformed GESB will provide a fund which is open to the public, to which members who cease to be employed in the WA public sector can continue to contribute. It will also allow other funds to compete for new WA public service members, giving State public servants more choice and more competition.
The reforms will see the State Superannuation Board, supported by the Department of Treasury and Finance, become responsible for the defined-benefit Gold State Super and Pension schemes, with investment management and scheme administration outsourced to GESB.
The Treasurer said significant progress had been made to date on the mutualisation of GESB. However two major issues, outside the State's control, needed to be resolved before a firm date for mutualisation could be set.
The State is currently requesting the Commonwealth to confirm that the proposed mutualisation arrangements are consistent with West State Super's current untaxed status. Legal advice on the issue is being sought from the State Solicitor General.
"West State Super has a unique status amongst superannuation funds - while it is an accumulation fund, it is not subject to taxation," the Treasurer said.
"If mutualisation was to jeopardise this untaxed status, the Government's position would need to be reviewed."
The value of the reserves for the market linked schemes is also a key issue for the mutualisation process.
"International financial conditions have affected GESB's reserves, as they have everywhere," Mr Buswell said.
"It would not be prudent to proceed with mutualisation without a level of reserves to support it."
He said WA Treasury and GESB were monitoring the level of reserves and independent actuarial assessments had been commissioned.
"The Government is also working to resolve key administrative matters still outstanding, including the details of arrangements for management of the defined benefit schemes, changes to regulations and other related matters of detail," the Treasurer said.
"My expectation is that these issues will be finalised fairly soon, leaving just two conditions to be met for the reforms to move ahead - an adequate level of reserves and a favourable decision on the untaxed status of West State."
